A deal with Coca-Cola could make Aurora Cannabis the real thing – The Motley Fool

Coca Cola (NYSE: KO) has had long slogans throughout history. A recurring theme dating back to 1969 is: "It is the real work." Now a possible deal with Coca-Cola could make a real Canadian marijuana grower the real thing.

Aurora Cannabis (NASDAQOTH: ACBFF) conducts serious discussions with Coca-Cola to develop cannabis-infused beverages, according to a BNN Bloomberg TV report. Could a deal with Coke and Aurora be even bigger news than Constellation Brands& # 39; (NYSE: STZ) co-operation with Canopy Growth (NYSE: CGC)?

Shadow of dollar sign on top of pile of marijuana leaves

Image source: Getty Images.

Main differences

There are some important differences between the possible deal between Coca-Cola and Aurora Cannabis than those between alcohol manufacturer Constellation Brands and Canopy Growth. One biggie is that the kind of cannabis-infused beverage that Coca-Cola is considering might not be the same as what Constellation and Canopy imagine.

BNN Bloomberg reported that Coca-Cola would not comment on discussions with Aurora. A spokesman for the company stated in an e-mail to BNN Bloomberg that "we, along with many others in the beverage industry, keep a close watch on the growth of non-psychoactive CBD. [cannabidiol] as an ingredient in functional wellness drinks around the world. The space evolves quickly. "

Canopy Growth CEO Bruce Linton said his company and Constellation are planning to launch cannabis-infused beverages, including low-calorie beverages with mixtures of cannabinoids. He told Jim Cramer of CNBC in an interview this summer: "We are talking about entering a bar and having a tweed and tonic."

Coca-Cola, on the other hand, seems interested in more therapeutic cannabis-infused beverages that focus on relieving cramps, inflammation and pain. One source told BNN Bloomberg that Coke is looking for the development of cannabis-infused drinks in the & # 39; & # 39; recovery drink & # 39; & # 39 ;. "

Constellation Brands also made two important investments in Canopy Growth. In October 2017, Constellation worked with Canopy and bought a 9.9% stake in the marijuana grower for about $ 191 million. Last month, Constellation invested another $ 4 billion in Canopy, bringing its stake to 38%. It seems more likely that Coca-Cola would form a joint venture with Aurora instead of buying a large part of the company, as Constellation did with Canopy.

A huge impact

However you look at it, a deal with Coca-Cola would be huge for Aurora Cannabis. It would also be extremely important for the cannabis industry in general.

After the Constellation-Canopy partnership was announced for the first time last year, many (including yours truly) thought that this was important to a large extent because it further legitimized the cannabis industry. And when Molson Coors later I chose his cannabis partner, I thought this was the next step towards legitimizing the industry.

Like many others, I thought the locks might open for other large companies to form alliances with marijuana growers. That seems to be what happens. Reports have recently been published about the Guinness brewer Diageo is perhaps the next of alcoholic beverage companies to forge a cannabis partnership. It is speculated that large tobacco manufacturers could also step into battle.

But if Coca-Cola cooperates with Aurora, it would, in my opinion, increase the degree of legitimisation of the cannabis industry more than any other agreement. Coke is one of the most well-known and respected brands in the world. A Coca-Cola deal would also increase the likelihood that even more beverage makers, from both alcoholic and non-alcoholic beverages, could enter into partnerships with marijuana growers.

A specially applicable Cocoke slogan

There have been many slogans for Coca-Cola over the years. I think one of those slogans is especially applicable in the discussion about a possible deal with Coke and Aurora: "Make it real." For a few reasons I mentioned the old Coca coke of 2005.

First, there is no deal yet. BNN Bloomberg reported that Coca-Cola met another top Canadian marijuana grower, Aphriaa few months ago, but those discussions did not go anywhere. It is possible that discussions between Coca-Cola and Aurora may also be lost. It is not real until a deal is closed.

Secondly, for investors who consider Aurora Cannabis or other marijuana stocks, make it real if you evaluate these stocks. It is easy to get caught up in the dizziness of big deals with big companies and the rapid growth of cannabis markets around the world. But also remember that the valuations of marijuana shares reflect a large part of this growth. Some claim that the shares reflect much more growth than is likely to be experienced in the coming years.

The shares of Aurora Cannabis, however, rose on the news about the possibility of a partnership with Coca-Cola. And with a good reason. It seems that the slogan of Coca-Cola that is most relevant is: "Have a Coke and a smile."

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